A bill discount is a financial arrangement where a business sells its accounts receivable, or bills, to a financial institution at a reduced price. This allows the business to receive immediate cash instead of waiting for customers to pay their invoices. The discount represents the cost of obtaining that cash sooner. Typically, the financial institution will collect the full amount from the customer when the bill is due. Bill discounts are commonly used by companies to improve cash flow and manage short-term financial needs without taking on additional debt.